Top crypto firms are turning to offshore regulators as a crucial deadline for receiving approval from the UK’s financial watchdog looms.
A slew of crypto companies are on a temporary register for digital asset service providers which allows them to continue operating while the Financial Conduct Authority (FCA) comes to a final decision on whether to grant the firms approval ahead of a 31 March deadline.
Meanwhile, companies including crypto wallet provider Wirex and digital asset brokerage service Globalblock have confirmed plans to withdraw from the register and seek regulation elsewhere in Europe. Wirex told City A.M. it is angling to continue serving its 250,000 UK customers from Croatia while Globalblock plans to serve customers as a European company registered in Lithuania.
“These changes will not affect customers, and Wirex continues to provide their industry-leading services as normal for customers globally, including those in the UK,” a spokesperson said.
FCA says firms ‘not meeting standards’
Just 33 crypto firms have made it onto the FCA’s coveted register, with 80 per cent of applications rejected or withdrawn. However, firms regulated in jurisdictions considered to have equivalent standards to the UK can continue to serve UK customers.
“We’ve seen a high number of the cryptoasset businesses applying for registration not meeting standards there to help ensure firms are not used to transfer and or disguise criminal funds,” a spokesperson for the FCA told City A.M..
“Firms that do not meet the expected benchmark can withdraw their application. Firms that decide not to withdraw have the right to appeal our decision to refuse, including through the courts,” the spokesperson added.
Crypto firms in Limbo
Key players in Britain’s crypto industry including Revolut, Copper, a crypto custodian advised by the UK’s former chancellor Philip Hammond, and Blockchain.com remain in limbo on the temporary register while they await the regulator’s final decision.
A spokesperson for Copper told City A.M. that the firm remains “in dialogue” with the FCA. The crypto custodian has set up an entity Switzerland which should be allowed to serve UK customers if its bid for approval fails.
While Revolut gave no comment on its regulatory application, an insider told City A.M. that the company expects to continue its operations past the 31 March deadline. It is as yet unclear whether the firm will continue to seek approval from the UK regulator or do so offshore.
Reputation for innovation
Charles Kerrigan, a Fintech partner at law firm CMS said a hostile regulatory environment for crypto “could harm the UK’s reputation for innovation.”
“This is an incredible piece of market innovation and as the world moves into Web3… I don’t think trying to hold people away form it is either realistic or a good idea,” Kerrigan said. “The FCA’s role is to apply the law not write the law and it needs a steer from policy makers – that’s what we need to hear.”
HM Treasury is reportedly planning an announcement on the future of crypto regulation in the UK later this month.